Capitalism can learn a lesson from sports, says Roger Martin

MUMBAI: Roger Martin, the Dean of the Rotman School of Management at the University of Toronto in Canada, feels capitalism has a lesson or two to learn from sports in order to correct the discrepancies in the ideology.

According to Martin, there are two kinds of games being played in capitalist system, the real game and the expectations games. The real game is one where organisations create real value by making real investments to create real products; on the other hand, the expectations game is one which investors buy shares in a company on the basis of expectations of likely performance of that company.

Drawing a parallel between Cricket and democratic capitalism, Martin said, "Capitalism can learn a lesson from all modern sports - whether American football or Indian cricket for that matter. Each major spectator sport actually involves a real game and an expectations game. In the real game of cricket, batsmen, bowlers and fielders take a real pitch and play real wickets, make real outs and score real runs. Eventually there is a real winner and real loser."

In an interview to DNA, Martin also said that there is an associated expectations game: betting on cricket matches. "In this game, imagine what will happen when the teams take the field and on the basis of those expectations place their bets. On the basis of those bets, bookmakers adjust the odds against the favourites and for the underdogs to balance the amount of money bet on either side."

Martin believes that "betting odds in a cricket match are identical to the stock price in capitalism" as both are products of the expectations market.

"The world of sports is clear about the relationship between the expectations market and the real market: they must be kept separate. If they are not kept separate - that is, if players in the real game are allowed to participate in the expectations game - they will wreck the real game. Cricket fans know this from the 2010-11 betting scandals in cricket in Pakistan. There key players were accused and tried for influencing the results of real games to aid bettors in making illegal profits in the expectations game."

That‘s where the similarities between sports and capitalism end as the latter encourages its stakeholders to play in the expectations market.

"In great contrast to the world of sports, capitalism not only allows, but also insists on the key players in the real market playing in the expectations market. CEOs and other key executives are forced to take a significant portion of their compensation by way of stock-based compensation. In doing so, capitalism threatens the health of the real game. On this front, capitalism is not as smartly managed as cricket," he avers.